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If you are the owner of one of the 33 million American small businesses, an issue you face today is how to attract and retain talent. Additionally, you may wish to help them plan for their retirement while also securing your future. When The SECURE ACT 2.0 was signed into law it one of the key goals was to make it easier for you to start and afford a plan that truly works for you and your employees.
The Act provided within its legislation tax credits for small businesses that sponsor a retirement plan. These tax credits can help offset the setup costs, administrative and even the costs associated with education for your employees. Employers who establish a new plan are eligible for a tax credit for the first three years in which the plan is maintained.For small businesses with less than 50 employees, here are tax credits you can apply for when sponsoring a new plan.
❖ Maximum credit is the lesser of $5,000 or $250 times each non highly compensated employee (2023 generally less than $150,000)
❖ $500 tax credit for the first 3 years for a plan that adopts an auto enrollment for participants. (Employees can opt-out of the plan, if desired.)
Along with these tax credits, there is an additional tax credit for eligible employer contributions.
❖ Eligible employees who earn less than $100,000 an employer can get a credit up to $1,000 credit on the matching contribution made into the employees account
❖ This credit is applicable for 5 years on a percentage basis
➢100% credit for years 1 and 2
➢75% credit for year 3
➢50% credit for year 4
➢ 25% credit for year 5
➢0% credit for year 6 and beyond
It is the opinion of DWG Retirement Services that with these tax credits it encourages employers to sponsor a retirement plan, but also incentivizes employers by allowing them to offset the burden of startup and administrative costs for the plan.
There is no one size fits all when it comes to retirement plans which may be what payroll providers or insurance companies might “sell” you. It is our role at DWG Retirement Services to not only be a fiduciary but be your advocate. We can assist you in building a retirement plan that meets the current and future needs of your company and employees and sets you apart from your competitors.
Contact: Mark Minder, RFCⓇ, MBA
DWG is the 401(k) arm of Darden Wealth Group. DWG does not give tax or legal advice. This is information only and does not constitute advice. Please consult your financial advisor or tax professional for information specific to your situation.